Financial Planning Truths

There were twins bothers, let’s call them Matt and Marc. Their uncle encouraged them to start saving and investing at an early age. Matt jumped on this advice right away and at age 21 he started contributing $5,500 to his Roth IRA every year. He did this for 10 straight years until he was thirty. He then decided he had enough saved for retirement and wanted to spend more money on his family. He did not contribute anymore to his retirement fund. His brother Marc waited ten years to act on his Uncles advice but at age 31 he began putting $5,500 a year into his Roth IRA and did so every year until he retired. Both brothers retired at age 65. Marc had taken a total of $192,000 out of his hard earned pay over the span of 35 years and put it toward his retirement. Matt only took a total of $55,000 out of his pay to put toward his retirement over a ten year period. They both got good advice from their uncle on how to invest the money and enjoyed an average rate of return of 8% over ...

The answer to this question depends on the person. As a general rule, if you pay off you balance every month and you are disciplined enough to not buy anything you would not buy anyway , a credit card is significantly better that debit card and both are significantly better than cash. If you have decent credit you should be able to get a no fee credit card, possibly with cash back or some other perk without any annual fees. You just need to shop around. First and for most: credit cards offer more and better protection than debit cards. Debit cards are governed under the Electronic Fund Transfer Act, (EFTA) and while that act provides you some protection there are holes in it and the timing of when you are get protected and getting your money back can present problems within itself. If there is a fraudulent transaction the money comes out of your account (usually checking account) right away. It can often take up to one billing cycle or more to get it back even if you prove t...

Not many people like doing their taxes, and our tax code doesn’t always make it as easy as it should be, but the key to reducing your stress during tax filling season is maintaining good records and knowing where to find then when you sit down to do your taxes. You should have received your W2’s and 1099s by now. 1099 is the form your bank and brokerage firms will use to report any income (over $5.00) they paid to you. This income is reported to the IRS and you are sent a form. (If you did some work as a subcontractor you may also receive one from someone that paid you for work you did). They are supposed to be in the mail by January 31 st which means you should have received them by now. If you have not, check first to see if you signed up for electronic delivery and if so they may be waiting on line for you. While the payer is responsible for getting them to you, you are responsible for reporting all income on them and cannot use the excuse “they never sent me one” as a reason ...

I am asking my loyal readers to please help me spread this Warning.   The Credit Karma Tax software has at least one Major flaw in it . Please share my blog post with others you know via Twitter and Facebook. Hopefully if this gets passed around enough someone’s friend of friend will know someone at Credit Karma that cares about their reputation and they will fix this. In the meantime we can warn as many people as possible and avoid them paying more in taxes than they have to. The issue I spotted appears to indicate they do not know how to interpret the tax code and even when an error is pointed out they have no one on staff to review how the tax code is written. As most of you know the tax laws and instructions for filling your taxes can be quite complicated. Many of us rely on tax software to help us file our taxes and we count on it being correct. However we are all responsible for the tax returns we file. I am an attorney and financial planner so I am more likely to ca...

It is tax time, and around this time last year I recommended Credit Karma tax preparation software to my readers. I used in last year, found it easy to use and had no problems with it. It is free for all users. Unfortunately this year I found a major flaw in the way their software is written. Their software does not recognize the right of unmarried people over 55 to make a $1,000 catch up contribution to their HSA accounts. This particular flaw will only affect those unmarried people over 55 that take advantage of the catch up contribution. While that is probably a pretty small percentage of the population those that do make the catch up contribution and do not catch the flaw could end paying more than $300 extra in state and federal taxes. For those that do not have to worry about that flaw I would still have concerns of about using this software since if they missed this what else might they have missed? Perhaps more importantly is my opinion that they have virtually no cus...

In case you missed the news the Dow Jones Industrial average had is largest single day point drop today .              While not its largest percentage drop it was still a hefty drop percentage wise at 4.6%, making it the largest single day percentage drop since 2011. This follows a 2.5% drop on Friday bringing the value of the stock market down more than 7% in two days! When these market drops occur I will often have people ask me “how much did you lose in the market today.” I can honestly tell them I did not lose a penny, and neither did you as long as you did not act foolishly and just stuck to your long term plan. No one likes to see their investments go down 7% so quickly, but you cannot focus on that. The more you have the more it seems to hurt. If you have a million dollars invested in the stock market (which all my younger readers who follow their plans will have at some point) it can be quite concerning to see ...

So you decided you need a financial plan that’s great. You started reading my blog and other articles and realize there are lots of great savings and investment options and so many things to save for you don’t know where to start. You can’t possibly do them all! First off congratulate yourself for realizing you need a plan and then take a deep breath. If you are committed to saving at least 20% of your salary there is not a wrong answer so you have won the biggest part of the battle. Some choices may be better than others but the most important thing is deciding to pay yourself first . While everyone’s situation is different I will try to give you some guiding principles to get you started on how to divvy up those dollars you are saving . While the guiding principles apply to anyone the details of this post will be geared toward young professionals and recent graduates just starting out. The guiding principles for your savings dollars should be 1.     ...